Is Cyprus Pushing The EU Down a Slippery Slope?

Cyprus was the fifth nation to formally seek emergency financial assistance from the Troika, a coalition of European Union finance ministers, the European Central Bank, and the International Monetary Fund responsible for ensuring euro zone economic stability.

When the call for help went out a few weeks ago, Cyprus was juggling a banking system with assets equal to 750 percent of its 2012 GDP, which was about $24 billion. Meanwhile, the Troika was juggling complicated and politically tense multibillion-euro bailouts in four major economies.

The Troika engineered a 10 billion-euro bailout package for the island nation that called for the closure of its second-largest bank and inflicted tremendous losses on uninsured depositors. The decision to close the bank and charge deposits has created a tremendous amount of fallout that economists and investors are still sorting through.

In an interview with Bloomberg on Friday, Jeromin Zettelmeyer, deputy chief economist at European Bank for Reconstruction and Development, said that stability concerns could spark outflows from large but struggling economies such as Spain and Italy…